YMCA North Incorporated v Auckland Council

[2023] NZHC 3697

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-904

[2023] NZHC 3697

UNDER

the Land Valuation Proceedings Act 1948

IN THE MATTER

of a claim for compensation under the Public Works Act 1981

BETWEEN

YMCA NORTH INCORPORATED

Appellant

AND

AUCKLAND COUNCIL

Respondent

Hearing:	On the papers
Counsel:	D M Salmon KC, S L Cogan and L G Berryman for the Appellant A R Galbraith KC, N R Hall and R S Abraham for the Respondent
Judgment:	14 December 2023

JUDGMENT OF GAULT J

This judgment was delivered by me on 14 December 2023 at 3:00 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

Solicitors / Counsel:

Mr D M Salmon KC, Barrister, Auckland Mr S L Cogan, Barrister, Auckland

Mr L G Berryman (YMCA North Incorporated’s instructing solicitor), Heimsath Alexander, Auckland Mr A R Galbraith KC, Barrister, Auckland
Mr R B Lange, Ms N R Hall and Ms R S Abraham (Auckland Council’s instructing solicitors), Simpson Grierson, Auckland

YMCA NORTH INCORPORATED v AUCKLAND COUNCIL [2023] NZHC 3697 [14 December 2023]

[1]    YMCA North Incorporated (YMCA) seeks leave to appeal to the Court of Appeal from this Court’s judgment dated 31 May 2023.1

[2]    The application is opposed by Auckland Council.   At the  parties’ request,    I determined that a hearing was not required and made timetable directions for submissions.2 The parties’ submissions were subsequently referred to me.

Factual background

[3]    The factual background is set out in the judgment of 31 May 2023 and need not be repeated in any detail. The dispute concerns the amount of compensation payable under the Public Works Act 1981 (PWA) by Auckland Council to YMCA in respect of part of its land at 149–157 Greys Avenue, Auckland that was acquired and covenanted for the purposes of the City Rail Link (CRL) tunnel.

[4]    Following an engagement process with landowners, and a formal notice under the PWA, by proclamation under s 26, Auckland Council:

(a)acquired the stratum estate freehold of approximately 1,684m2 of subsurface land downwards from approximately 10-14m below ground for several metres (YMCA’s Railway Land); and

(b)imposed a restrictive covenant over an area of subsoil above the top of YMCA’s Railway Land between 5m below the ground and 10–14m below ground (YMCA’s Covenant Area).

[5]    The compensation market value assessed by Mr Taylor for Auckland Council on 2 December 2020 was $262,966 plus GST (if any).

[6]    On 14 April 2021, YMCA claimed compensation of $18,486,189.29 plus GST (if any) from Auckland Council, made up of $18 million for injurious affection and

$486,189.29 for disturbance costs. Auckland Council refused to admit the claim, which was therefore required to be heard by the Land Valuation Tribunal (Tribunal).

1      Auckland Council v Samson Incorporation Limited [2023] NZHC 1351.

2      Minute dated 27 September 2023.

[7]    On 24 May 2022, the Tribunal fixed the total compensation to be paid to YMCA in respect of the acquisition of part of YMCA’s land at $2 million.

[8]    YMCA appealed and Auckland Council cross-appealed. The appeals were brought under s 26 of the Land Valuation Proceedings Act 1948 (LVPA). On such appeals the High Court sits with a valuer as an additional member.

[9]    The appeals were heard sequentially after an appeal and cross-appeal in relation to another decision of the Tribunal,3 fixing compensation to be paid to Samson Corporation Ltd and Tedcastle Estates Ltd (Samson) in respect of the acquisition of other land acquired and covenanted for the purposes of the CRL.

High Court judgment

[10]   This Court delivered a single judgment addressing both the YMCA and Samson appeals and cross-appeals. Having addressed the legal principles applicable to the entitlement to compensation,4 the relevance of the Tribunal’s earlier decision in Body Corporate 212138 v Minister for Land Information (Waterview)5 and the nature of the covenant,6 we addressed the highest and best use (HABU) of the YMCA site. We agreed this was an apartment development although not the maximum carpark option proposed by YMCA.7 We concluded that, subject to stigma, the impact of the covenant was to be measured in terms of the costs involved in relying on a pre-approval and obtaining consent from the covenantee.

[11]   Turning to the valuation evidence, we agreed with the Tribunal’s “before” market value of $36.5  million.8   In relation to  the “after” value, we agreed with    Mr Taylor’s acquisition value of YMCA’s Railway Land of $100psm, resulting in compensation of $168,400 for the 1,684m2 of land taken.9 We did not accept an “after” value from YMCA’s valuer, Mr Dean, based on a 30 to 40 percent reduction in

3      With leave for the parties to appear on each other’s appeals given the commonality of issues.

4      Auckland Council v Samson Incorporation Limited [2023] NZHC 1351 at [97]-[111].

5      At [151]-[153], referring to Body Corporate 212138 v Minister for Land Information [2017] NZLVT 2.

6      At [154]-[168].

7      At [199]-[208].

8      At [216]-[220].

9 At [222].

property value. Even if there were a real prospect of consent not being obtained for the HABU, there was no alternative valuation evidence based on a reasonably informed hypothetical purchaser’s assessment of that risk rather than the inability to achieve the maximum carpark scheme.10

[12]   In relation to the costs involved in relying on the pre-approval and obtaining consent, Mr Taylor’s calculation of $690,000 was not challenged in evidence and appeared to be accepted by the Tribunal albeit being subsumed into its higher compensation award.11

[13]   Finally, we considered that the $168,400 compensation for the unused subterranean land taken for the tunnel itself (and a 20 percent cost contingency) sufficiently addressed any residual stigma concerning the tunnel and the covenant.12 Accordingly, the total compensation payable to YMCA was $858,400. We therefore dismissed YMCA’s appeal.13

[14]   We did not accept Auckland Council’s betterment argument, agreeing with the Tribunal that no deduction was appropriate in this case. Even without betterment, however, the total compensation payable to YMCA was less than that awarded by the Tribunal and therefore we allowed the cross-appeal and substituted the compensation payable to YMCA.14

YMCA’s proposed questions of law

[15]   YMCA’s submissions in support of leave to appeal refined the proposed questions of law as follows:

(a)Is market  evidence of the claimed reduction in  value required under  s 62(1)(b)(ii) of the PWA, where the relevant acquisition is of an interest in land for which there is no general demand or market?

10     Auckland Council v Samson Incorporation Limited [2023] NZHC 1351 at [223].

11     At [224]-[226].

12 At [227].

13     At [228]-[229].

14     At [230]-[238].

(b)In the absence of market evidence, what valuation methodologies are available when applying the before/after test under s 62(1)(b)(ii)?

(c)Is the acquiring authority permitted to unilaterally exercise the cost to cure before the acquisition has occurred?

Leave principles

[16]   There is no dispute as to the applicable principles for leave to appeal in this context. Section 18A of the LVPA provides:

(1)Notwithstanding anything in any enactment, any party to any proceedings before the Court who is dissatisfied with any award or order of the Court may, with the leave of the Court or of the Court of Appeal, appeal to the Court of Appeal; and section 56 of the Senior Courts Act 2016 shall apply to any such appeal.

(2)In determining whether to grant leave to appeal under this section, the Court to which the application for leave is made shall have regard to the following matters:

(a)whether any question of law or general principle is involved:

(b)the importance of the issues to the parties:

(c)the amount of money in issue:

(d)such other matters as in the particular circumstances the Court thinks fit.

(3)The Court granting leave under this section may in its discretion impose such conditions as it thinks fit, whether as to costs or otherwise.

(4)The decision of the Court of Appeal on any such appeal shall be final.

[17]   The Court of Appeal summarised the approach to s 18A in Chief Executive of Land Information New Zealand v Luke:15

[17]      The four criteria specified under s 18A(2) should be evaluated as a whole. Not every question of law which is important to one of the parties and which involves a lot of money should be given leave. The application for leave must be considered in light of this court’s function on second appeals.

15 Chief Executive of Land Information New Zealand v Luke [2008] NZCA 43. Luke was determined prior to the enactment of s 56 of the Senior Courts Act 2016, and the consequential amendment of s 18A. However, Luke was applied without modification in Cassata v Minister for Land Information [2022] NZHC 1198.

As this court said in Waller v Hider, upon a second appeal, “this Court is not engaged in the general correction of error”: at 413. And further:

It is not every alleged error of law that is of such importance, either generally or to the parties, as to justify further pursuit of litigation which has already been twice considered and ruled upon by a Court.

[18]      This court also noted that the scarce time and resources of this court were not to be wasted and additional expense for parties was not to be incurred “without realistic hope of benefit”: at 413. That first point was reiterated by this court recently in Downer Construction (New Zealand) Ltd v Silverfield Developments Ltd [2007] NZCA 355 at [36]. There this court noted the trend, both here and in the United Kingdom, “to reverse the steady increase in the number of [second appeals] reaching the Court of Appeal, and so to free up valuable and expensive judicial resources to give more and more effective attention to hearing first appeals”. These general principles, relating as they do to the fundamental role of this court and the need for proportionality in civil litigation, must underlie any leave decision under s 18A.

[18]   This differs from the well settled principles relating to leave for a second appeal to the Court of Appeal set out in Waller v Hider,16 albeit they would likely produce the same outcome as application of the s 18A criteria.17

[19]   Although s 18A provides that s 56 of the Senior Courts Act 2016 shall apply to any such appeal, the “filtering mechanism” approach in relation to interlocutory appeals under s 56(3) is not directly applicable.18

YMCA’s submissions

[20]   Mr Salmon KC, for YMCA, submitted that the identified questions of law arise from what is an irreconcilable tension at the heart of this Court’s decision, namely that s 62(1)(b)(ii) of the PWA envisages a scenario where “only part of the land of an owner is taken or acquired under this Act and that part is of a size, shape, or nature for which there is no general demand or market” but the Court found that market evidence was required to determine the value of the balance of the owner’s land after the taking or acquisition. He submitted that to avoid the provision becoming unworkable, the question becomes what valuation methodologies are available when applying the before/after test.

16 Waller v Hider [1998] 1 NZLR 412 (CA) at 413.

17 See Chief Executive of Land Information New Zealand v Luke [2008] NZCA 43 at [16].

18 That approach was summarised in Greendrake v District Court of New Zealand [2020] NZCA 122 at [6]. See also Tomar v Tomar [2021] NZCA 419 and Sneesby v Southern Response Earthquake Services Ltd [2023] NZCA 206.

[21]   Mr Salmon submitted that Mr Taylor’ assessment, which used a “costs to cure” approach, is no more market based than Mr Dean’s percentage reduction approach. Further, he submitted the “costs to cure” approach is a way to mitigate the reduction in market value, not a measure of the reduction in market value. Both valuers’ approaches involve the exercise in valuer’s judgement.

[22]   Mr Salmon also submitted that, if the “costs to cure” methodology is available, it will not be applicable to all cases and he asks how is compensation to be assessed in such cases.

[23]   Mr Salmon submitted the issues are of general and/or public importance, and are also of significant importance to the parties.

[24]   In summary, Mr Salmon submitted that the intended appeal does not seek to engage the Court of Appeal in general error correction. Rather, the intended appeal concerns questions of law the answers to which will determine the proper approach to the assessment of compensation for the compulsory acquisition of interests in land for which there is no ready market. As matters currently stand, he submitted it is not clear how claimants for compensation under s 62(1)(b)(ii) can be expected to discharge the onus of showing a reduction in value in the “after” scenario. He submitted this is a matter that requires clarification for owners and acquiring authorities alike if the principle of full compensation is to be given effect.

Discussion

[25]   Having considered the submissions for YMCA with the proposed questions of law, and the submissions for Auckland Council in opposition, I consider that leave to bring a second appeal should not be granted, for the following reasons.

[26]   I do not consider that questions of law or general principle are involved.      In relation to the proposed questions concerning the stated tension at the heart of the Court’s decision, as Mr Galbraith KC submitted for Auckland Council, there is no irreconcilable tension. There was no dispute that the acquired subterranean land has no general demand and therefore that section  62(1)(b)(ii)  of  the  PWA  applied.  The Court did not find that market evidence was required in respect of the value of the

acquired subterranean land (that is, YMCA’s Railway Land). The judgment accepted Mr Taylor’s value of $100psm, resulting in compensation of $168,400 for the 1,684m2 of land taken. In relation to the covenant taking/injurious affection, the Court did not accept an after value based on Mr Dean’s reduction in property value. It found that, even if there were a real prospect of consent not being obtained for the HABU, there was no alternative valuation evidence based on a reasonably informed hypothetical purchaser’s assessment of that risk rather than the inability to achieve the maximum carpark scheme. At most, that was a finding that market evidence of a reduction in value of the balance of the land was required. As Mr Galbraith submitted, YMCA’s submissions conflate an absence of evidence on the market value of the balance of the land with an absence of evidence supporting Mr Dean’s valuation. There was market evidence on the effect on the value of the balance of the land. This was provided by Mr Taylor, whose evidence indicated that properties with tunnels beneath them did not suffer any reduction in value. There was no market evidence supporting Mr Dean’s valuation using his 30-40% reduction.

[27]   In relation to the “costs to cure” approach, there was evidence to support it   in this case. As Mr Galbraith submitted, the Court did not find that this method must be used in every case; simply that it was appropriate in this case. That was in the context of evidence, as indicated, that properties with tunnels beneath them did not suffer any reduction in value.

[28]   While I accept the result is of significant importance to YMCA given the much higher amount claimed, both the Tribunal and this Court – with the benefit of expert valuers – have identified an absence of market evidence to support anything close to that amount, as Mr Galbraith submitted.

[29]In these circumstances, a second appeal is not justified.

Result

[30]The application for leave to appeal is declined.

Gault J